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Can Limited Company contractors claim for Christmas party expenses?

Christmas party expenses

The festive season will soon be upon us and whilst you may not officially start preparing for a few weeks to come, if you’re currently contracting in an office it will be tough to escape the office Christmas party chit-chat. As contractors aren’t usually invited to the festivities, it’s only natural to feel a little left out…

Even though HMRC is the Grinch throughout most of the year, they do allow even the smallest Limited Company to enjoy the festivities, by permitting a tax exemption for the allowable costs of a Christmas event. So if you’re a one-person band you can still give yourself a festive celebration for working so hard throughout 2017.

 

What is the tax exemption allowance?

HMRC allows a 19% tax exemption via corporation tax relief for all festive entertaining costs, as long as this meets the criteria as listed below.

And should you be a one-person band you don’t have to party alone. Read on to find out how you can invite others to your party.

 

HMRC’s rules for festive partying

For your event to qualify for the tax exemption, it must be:

1. Available to employees in one location

If your Limited Company has employees in various locations, the event must be held in one central location, which is accessible for all. The event must be available for both directors and staff, or director’s guests (such as spouses or civil partners, and children of the directors and employees).

 

So in theory, as the director of your own Limited Company you could hold a Christmas party for your immediate family.

2. A maximum of £150 per person

For each person who attends the event an additional £150 per person is allowable. The £150 is an absolute maximum which HMRC strictly applies.

The £150 limit must include VAT, transport costs to and from the event, and the total cost of any overnight accommodation. These costs are then combined and divided between the number of attendees, to arrive at the cost per head.

Should the total amount per head exceed the £150 limit, the maximum exemption will not apply and the total amount will be taxed. HMRC are very strict about this allowance so if you’re unsure, speak to your Personal Accountant to ensure your calculations are correct.

 

What happens if you have more than one event per year?

Hosting company events isn’t just exclusive to the festive period, you are able to host events throughout the year. You could choose for example, to host a summer event as well as a winter event. So long as the total combined amount does not exceed £150 per head per tax year, the exemption will still apply.

Should any individual event cost exceed this limit, HMRC will only apply the exemption to expenses for the events that fell within the allowable limit.

 

Final thoughts – have fun!

Regardless of whether you will host a festive event, it’s a fantastic allowance that every Limited Company director is entitled to, so ensure you make the most of it. Why not start planning your next event today?

If you have any questions surrounding the annual events expenses, or any other type of Limited Company expenses, be sure to email/live chat us or call our expert team directly on 01202 901 385.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.